Asset turnover
AccountingRevenue divided by the assets employed to produce it, showing how much sales each euro of asset base carries.
Also written: sales to assets, asset turns
Asset turnover is revenue divided by net operating assets. It is the other half of the return on capital story: a business earns its return either by making a good margin on each sale or by making many sales off a small asset base, and most business models sit clearly at one end or the other.
In forecasting it is the fastest link between a revenue plan and a capex plan. If a euro of assets carries two euros of sales today, a plan adding 400 of revenue needs roughly 200 of additional assets, and capex less depreciation across the forecast has to get there. A revenue forecast outrunning the capex that funds it is one of the most common internal contradictions in a model, and this is the one line calculation that finds it.
The test is deliberately approximate and should be presented that way. Turnover shifts as a business scales, existing capacity is rarely fully utilised, and an asset light expansion route such as franchising breaks the relationship altogether. It catches a mismatch of the wrong order of magnitude, which is exactly what it is for.
Comparisons only work within a business model. A discount grocer and a steel producer have almost nothing to say to each other on this measure, so the useful comparison is against the company's own history and against genuine peers.
Worked example
Revenue of 1,000 on net operating assets of 500 gives asset turnover of 2.0x.
A plan reaching 1,400 of revenue needs roughly 700 of assets at the same turnover, so 200 of net additions. If capex of 450 less depreciation of 350 adds only 100, the plan is short by about half.